October witnessed an unprecedented inflow of over Rs 1 lakh crore by domestic institutional investors (DIIs) in Indian equities, setting a new monthly record. This significant investment came in response to intense selling pressure from foreign institutional investors (FIIs), who sold equity worth Rs 102,931 crore up to October 24. DIIs have invested a cumulative Rs 4.41 lakh crore in 2023, with expectations of more by year-end as mutual fund-driven retail participation continues to grow.
Drivers of DII Investment Surge
The record-breaking DII inflows stem from consistent contributions via Systematic Investment Plans (SIPs) alongside insurance and retirement funds, according to market experts. Inflows are seen as part of a broader shift in retail investor behavior, with more individuals participating in the market through mutual funds. The previous DII investment record of Rs 56,356 crore in March has now been surpassed, underscoring the strength of this trend.
Challenges from FII Outflows
Foreign portfolio investors (FPIs) are anticipated to maintain a selling stance in the short term. Market sentiment has been dampened by Middle East tensions and uncertainties surrounding the US presidential election. This trend saw FIIs sell equities worth Rs 4,613 crore on October 30, offset slightly by DII purchases amounting to Rs 4,518 crore on the same day.
Strong Domestic Macros Boost Market Sentiment
Domestic economic indicators continue to lend optimism to the Indian market. Robust Purchasing Managers’ Index (PMI) data and a promising economic growth forecast by the Reserve Bank of India (RBI) for FY25 suggest resilience and recovery in the economy. With manufacturing showing signs of revival, experts believe this could encourage investors to invest in quality stocks, further boosting the stock market’s health.
Stock-Specific Market Trends
A notable trend in October’s market activity was stock-specific volatility. Better-than-expected results led to sharp increases, with stocks rising up to 20% in a single day, while poor results saw corrections of approximately 15%. This trend, experts suggest, highlights a shift toward stock-specific analysis rather than focusing solely on benchmark indices, signaling a more nuanced investor approach amid market fluctuations.
